Sharing Your Financial Life
By Dara Duguay
Fall 2008
According to a 2004
In addition to the emotional stress a divorce can bring, financial stress often is involved. In many cases, money is at least a contributing factor to the breakup of the marriage.
Adjusting to single life again can feel like moving in reverse. You spent years accumulating a home, cars, furniture and investments with a spouse, and now you are selling or splitting up those assets.
That's why it's essential for couples to take control of their finances. It makes financial sense as well as romantic sense. Here are some rules of the road for married couples:
Decide upon mutual goals and develop a plan to accomplish them jointly. In some unions, one partner is designated as the chief financial officer who pays all the bills. In others, the fiscal duties are divided. Do what works for you, but spell it out. No one wants to pay late charges because it wasn't clear who was supposed to pay the bill. A team approach means no unilateral decision-making.
Be completely honest about your finances. Ideally, this honesty occurs prior to cohabitation. For example, a negative credit rating may adversely impact a newly married couple's financial life. Your ability as a couple to jointly qualify for credit at a low rate can be diminished by one partner's financial challenges.
Develop a spending plan or budget. Without a budget in place, you will have no idea where your money is going. A budget helps to create order in a household and cuts down on haphazard spending. Set ranges rather than absolute limits on certain expense categories. Once these are set, work as a team to stay within the parameters. For example, if you are approaching the upper limit of your "meals out" allowance for the month but are comfortably going to meet your "grocery" allotment, consider a steak at home instead of dining out.
Think about how to organize your accounts. You can choose from several types of arrangements. A joint account pools all your income together. Another option is to maintain separate accounts and assign bills based on income. This option gives each person the most autonomy. Some couples choose a combination of the two methods, with a joint account for shared expenses such as a mortgage, day care or groceries, and separate accounts for individual expenditures such as car payments, clothing or hobbies. You may want to experiment with different organizational structures until you find the system that is the most compatible for your family.
Consult each other on all “major purchases.” Since couples may have different ideas on the dollar amount that constitutes a major purchase, set a limit. Agree on a dollar amount where any purchases up to that limit can be made without consulting each other. Endeavor to be open about any instance when you deviate from this agreement. Hiding over-the-limit purchases made without consultation can only lead to trouble.
“Money talk" meetings should become a regularly scheduled family event. Money discussions should be comprehensive and not only include a monthly budget review but also a review of the progress toward long-term goals. Your financial summits could coincide with bill paying or take place when your bank statement arrives. The first meetings may be difficult if you are not used to discussing money issues, but eventually they will become more routine and comfortable.
Set financial goals that are challenging yet attainable. For example, if you both agree to start a college fund for your newborn, you need to decide on a set amount to go toward that account each month. These goals should not cause such hardship in your financial life that you later decide they are impossible and abandon them.
Make it a habit to continually eliminate "wants" from your monthly budget. Everyone desires a few "creature comforts," but there probably are some areas you can eliminate without pain. Consider your monthly budget as your financial garden; plant it neatly, then go back and weed it regularly.
Maintain at least one separate credit card. Even if you apply for joint credit cards, you should still have at least one credit card in your own name. Each partner needs a strong individual credit rating as insurance in case one of you gets into credit difficulties. If you do decide to part ways, you'll have an easier time obtaining credit with your own credit history versus a non-existent or negative joint history.
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Dara Duguay is Director of the Office of Financial Education for Citi and the author of several self-help personal finance books. This article is excerpted from “The Citi Commonsense Money Guide for Real People.” Military Money readers can order it at a VIP discount from www.commonsensemoneyguide.com.